Diana Clement: Splitting property not always straightforward

No case is ever black and white when it comes to division of relationship property after the couple go separate ways

The law doesn't always go the way people think it should. Photo / Thinkstock

Every year, thousands of Kiwis will get a first-hand look at the Property (Relationships) Act. If their legal, civil union or de facto "marriage" has broken down they will almost certainly have assets or debts to split.

Splitting property isn't as straightforward as it may appear. On the surface the act says property is split 50/50 after three years together - or less in special circumstances such as where there are children.

No case is ever black and white, however, when it comes to the just division of relationship property. What's more, the courts hear new cases each year and inevitably some of them will set precedents. Such decisions help the law keep pace with changing conditions and expectations, as chief justice Dame Sian Elias noted in an address to the Family Court conference.

This week I've been asking family court lawyers for their opinions on the most important cases of the past couple of years. They're all available on the internet for anyone who cares to peruse them.

One case, Rose v Rose, has had a lot of attention paid to it. The husband had inherited two farms, but his wife had contributed to their development by earning outside income and looking after the family during the 25-year marriage. That enabled him to dedicate his time to developing vineyards on both properties.

The wife argued that without her outside income, he would have been forced to sell one of the properties in the 1980s. The case went all the way to the Supreme Court.

Janice Harland, a partner at Brookfield Lawyers, says cases of this nature require a delicate balancing exercise by the courts.

"On the one hand, the husband has contributed the land which has often been held in his family for generations. However, the wife, by her efforts in raising their family, frees the husband to work on and develop the land."

There was no question that two farms owned by the husband - excluding a home on one of them - were separate property. Nonetheless the court awarded the wife 40 per cent of the rise in value of the husband's separate property. "In this case, the balance ultimately struck by the court was reasonable," says Harland.

It was the first time the Supreme Court had commented on provisions in the Property (Relationship) Act regarding indirect contributions to relationship property, says Nicola Peart, professor of law at the University of Otago.

The law doesn't always go the way people think it should. Back in the old days - especially before 1976 - women didn't have much of a claim against the husband's property if they stayed at home to look after children and he registered the house in his name alone. Those attitudes haven't totally gone.

Judge S. J. Coyle noted in the Dunedin Family Court that one partner in a case appeared to have "a view of life which is demeaning of women, of the unpaid role that women do in the household, and he appears unable to recognise that Mrs G's uneconomic as well as her economic contributions have equal worth and value." The man had failed to follow court orders to get a family home ready for sale or interact with real-estate agents. The ex-wife won an occupation order so she could move in and prepare the property for sale.

One especially notable case, says Peart, was that of successful Kiwi artist Grahame Sydney. Sydney had amassed a collection of his own and others' art over the years, which he argued was either taonga or separate property. Taonga are not included as family chattels and therefore aren't part of the pot of assets to be divided.

The relationship lasted about three years and six months. During that time the Sydneys lived together in his property and started two businesses - a company to make films and another to create postcards using the husband's art. The wife also helped to redesign his website.

The interesting aspect of the case related to a long list of artworks worth more than $350,000. Those artworks held in the husband's studio were deemed by the court to be separate property.

The disagreement came over the balance of the artworks. The court ruled that one painting, Southern Crossing, was held informally in trust for Sydney's children - to which the mother of his children, an earlier wife, testified.

The court ruled in relation to other paintings kept in the house that "taonga" had to be read in the Maori sense, even if the parties were Pakeha, and that the items must have been presented in a marae-like setting and have an accompanying history or whakapapa that gave them significance or mana.

The paintings, however, were important to Grahame Sydney because some were painted by him and others were "received as gifts or purchased because of particular personal associations between Mr Sydney and those artists", the judge noted, rather than presented in a marae-like setting.

The court viewed them as "ornaments decorating the home" and they became relationship property as a result. Sydney, did, however receive some sympathy from the court when he argued there were "extraordinary circumstances" that would make equal sharing "repugnant to justice".

The judge ruled that the assets including the artworks be split between the couple unevenly with him receiving 60 per cent and her 40 per cent.

"The issue that was particularly interesting was the classification of the art work that Grahame Sydney had acquired or painted before he met his second wife," says Peart.

What's more, there is case law supporting classification of artwork as taonga, says Peart. "Judge Coyle disagreed with those cases."

Peart says the case was also of interest because the artwork was to a large extent the product of Grahame Sydney's labour carried out before he started a relationship with his second wife, Heidi.

"Had the nature of his work been in the form of investments or a business, she would have had no right to it at all," says Peart. "But because it was art work that hung in the house, the fact that it was acquired before the relationship began and therefore in no way attributable to their partnership, was irrelevant.

"Normally, family chattels are the sorts of things that are closely associated with the home," she adds. "To some extent that was the case here, but it was also the obvious place for him to 'store' his work. The artworks stored elsewhere, such as in the shed, were excluded, because they were not hanging in the home and therefore were not family chattels."

Another important recent case heard in the High Court was K v K. Peart says the case dealt with the difficult issue of de facto partners transferring assets into trust before the Property (Relationships) Amendment Act 2001 came into force. Before the amendment, de facto partners didn't have any statutory rights to share property.

Among other issues that came up in K v K, the de facto husband argued that a sale and purchase agreement in 1997, which noted that his partner had a 15 per cent share of a farm property as tenant in common, was in effect a property-sharing agreement under the 2001 Act. He argued that the sale and purchase agreement was a valid agreement to contract out of the provisions of the new act.

The judge in the case noted, however, that a property-sharing agreement that was drafted at the time of purchase was never signed and that reinforced the conclusion that the parties did not focus on the future division of the farm when they bought the property in 1997.

However, the judge ruled that an apartment put into a trust in 2000, just before the change in matrimonial property law, was transferred for tax reasons, not to put it "beyond the reach" of the man's partner.

Diana Clement is a freelance journalist who writes about personal finance and careers. She has worked as a journalist for more than 25 years in both New Zealand and the UK. Diana has contributed to a large number of local and international publications. Her pet topic is the secrets of saving money.